When I looked at the original Fair Tax Mark methodology, which is now referred to as the “pilot study”, I had a good idea of what the problems with the method would be. I alluded in my original post on the Fair Tax Mark that I thought the rate analysis element looked like it was copied from Richard Murphy’s corporate tax gap calculation and that any errors would have been duplicated.

Broadly, I concluded that the same mistakes were made in the FTM method as were made in Richard’s corporate tax gap estimates. This included the mathematical errors, including perfectly legitimate tax reliefs within the estimate of tax avoidance/unfairness and ignoring deferred tax (which is actually an extension of ignoring legitimate reliefs).

As Christie Malry points out, Richard appears to have acknowledged much of the criticism of that original method and considerably softened his rhetoric over what a business’s current rate of tax is “expected” to be. And that is something which Richard deserves credit for -I maintain that the real value in something like the Fair Tax Mark derives from the rigour of its method as opposed to how catchy the branding is.

But, an unavoidable implication of that acknowledgement is that the same criticism leveled at Richard’s corporation tax gap methodology is also valid. After all, if paying a lower rate of tax through intentional reliefs is now universally agreed to be “fair”, why would we include these amounts in estimates of “tax avoidance”?

Or, perhaps, do we now have a new category of “fair tax avoidance” to quantify and debate the morals of?

To echo Christie’s argument, I do not think the two concepts can co-exist. Some of the assumptions underpinning the differing methods are now mutually exclusive unless we accept that “tax avoidance” is “fair”. I don’t know about you, but I cannot see Richard making that argument.